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CE 028 151
PACE. A Program for Acquiring Competence in-Entrepreneurship. Part I: Getting Ready to BecomeEntrepreneur. Unit A: Nature of Small Business.Research and Development Series No. 194 A-1.Ohio State Univ., Columbus, National Center forResearch in Vocational Education.Bureau of Occupational and Adult Education (DHEW/OE).Washington, D.C.498AH6021880.,G00760393095p.; For related documents see CE 043 1 _=169. Partsmay not reproduce clearly.National Center Publications, The Nationai Center forResearch in Vocational Education, rhe Ohio StateUniversity, 1960 Kenny Rd., Columbus, OR 43210 (RD194 A-1, $6.25; I-art I of set, RD 194 Al-A3, plus D:$18.00;1 Part II of set, RD 194 81-37, plus D- $35.00:Part III, RD 194 C1-C8, plus D: $4000: entire set ofeighteen documents, $70.00) .
EDRS PRICE MF01/PC04 Plus Postage.DESCRIPTORS Adult Education; Behavioral Objectives; Business
Administration; *Business Administration Lducation;Competency Based Education; Costs; Curriculum Guides:Highar Education; InstructiOnal Materials; LearningActivities; Postsecondary Education; PretestsPosttests: Self Evaluation (Individuals); *Standards;Units of Study
IDENTIFIERS *Entrepreneurs; *SmAli
ABSTRACTThis three-part curriculum for entrepreneurship
education is primarily for postsecondary level, including four-yearco peg c and adult education, but it can be adapted for special
. groups or vocational teacher education -. The emphasis of tAe threeinstructional units in Part I is unde:standing businesses. Unit Afocuses on defining small business. It provides informa';ion onstUndards, used to identify small businesseS, different types of smallbusinesses, and their impact on the ec3nomic system. Other topicsinclude scope and trends of small business, start-up costs, futureoutlook, causes of business success and failure, and tasks of theentrepreneur. Material is organized into three levels of learningwhich progress from simple to complex concepts: Exposure,Exploration, and Preparation/Adaptation. Each level containspreassessment; teaching/learning objectives; substantive information(questions in margins guide the students' reading); activities,including a postassesStent; and a self-evaluation. Definitions ofimportant terms are found at the beginning of the unit; abibliography and listing of sources for further Information areappended. The four-page instructor's guide contains theteaching/learning objectives, teaching/learning delivery suggestions,and pre/postassessment suggested responses. (YLB)
Research and Development No. 194,4,1
PACE
A PROGRAM FOR ACQUIRING
COMPETENCE IN ENTREPRENEURSHIP
PART I: Getting Ready to Become an EntrepreneurUNIT A: Nature of Small Business
The National Center for Research in Vocational ducationThe Ohio State University
Columbus, Ohio 43210
1980II DEPARTMENT OF HEALTH.
EDUCATION &WELFARENATIONAL INSTITUTE OF
EDUCATION
THIS DOCUMENT HAS BEEN BEIBBO,DUCE° EXACTLY AS RECFiVFO POA,A
THE PEP ON DB OBOANIZATIoN opicoN,ATING IT BOIHTS OF vrEVL OP DPINIONSSTATED 00 NOT FLECESSABB REBIEE.SENT OEFIF,F1L NATIONAL ,NSTITtirr OFEDUCATiON ynsi T iON TIP POI Icy
THE NATIONAL CENTER MISSION STATEMENT
The National Center for Research in Vocational Education's mission isto increase the ability of diverse agencies, institutions, and organizationsto solve eL'ucation problems relating to individual career planning,preparation, and progression. The National Center fulfills its mission by
Generating knowledge through research
Developing educational programs and products
Evaluating individual program needs and outcomes
Providing information for national planning and policy
Installing educational programs and products
Operating information systems and services
Conducting leadership development and training programs
-NDINGINFORMATION
Project Title: A Program for Acquiring Competence in ntreeneurs(PACE)
Contract Number:
Project Number:
G007603930
498AH60218
Educational Act Under Vocational Education Act of 1963, Part C amended in
Which the Funds Were 1968 and in 1976. FL 90-576 PI, 94-42
Administered:
Source of Contract:
Project Officer:
Contractor-
Executive Director:
Disclaimer:
DiscriminationProhibited:
Department of Health, Education, and WelfareUnited States Office of EducationBureau of Occupational and Adult EdLca:ionWashington, DC
David a Pritchard
The zonal Center for Research in Vocational EducationThe Ohio State UniversityColumbus, Ohio 43210
Robert E. Taylor
The material for this publication was preparod pursuantto a contract with the Bureau of Occupational and Adult
Education, U.S. Department of Health, Education, andWelfare. Contractors undertaking such projects under
Government sponsorship ar ncouraged to express freely
their judgment in profes!= ual and technical matters.Point. of view or opinions do not, therefore, neces-sarily represent official U.S. Office of Educationposition or policy.
Title VI of the Civil Rights Act of 1964 states:person in the United States shall, on the grounds of
race, color, or national origin, be excluded from
participation in, be denied the benefits, of, or hesubjected to discrimination under any program oractivity receiving Federal financial assistance."Title I of the Education Amendments of 1972 states:"No person in the United States shall, on the basisof sex, be excluded from participation in, be deniedthe benefits of, or be subjected to discriminationunder any education program or activity receivingFederal financial assistance." Therefore, the National
Center for Research in Vocational Education, like everyprogram or activity receiving financial assistance from
the U, S. Doi' 'Ieri1 of Health, Education, 1 Welfare,
ampliance w t' ;e
PART I:
UNIT A:
FOREWORD
GETTING READY TO BECOME AN ENTREPRENEUR
NATURE OF SMALL BUSINESS
TABLE OF ONTENTS
H O W T O U S E PACE
OVERVIEW OF THE UNIT
DEFINITIONS TO KNOW BEFORE You DtGiN
PACE PATH OF STUDY
LEVEL I EXPOSURE
PREASSESSMENT
TEACHING/LEARNING OBJECTIVES
SUBSTANTIVE INFORMATION
Page
V
vii
xi
1
Defining Small- BusinessSmall Business in Our Economy.Number of SMall Businesses 10
Small Business Risks 11
Advantages of Being a Small Business- 12
ACTIVITIES 15
Assessment One 15
Assessment Two 18
Postassessment 18
SELFEVALUATION 19
LEVEL II. EXPLORATION
PREASSESSMENT 21
TEACHING/LEARNING OBJECTIVES - 22
_L1
SUBSTANTIVE . . 23
Understanding Small Business 23
Types of Small Businesses.. .. .... ... . . .
Opportunities AvailableCharacteristics of Our Economic SystemProblems of Small Businesses 37
ACTIVITIES' 40
Assessment One ,1-!0
Postessess ant 41
SELF-EVALUATION.-- ......:..... . . . . .. .
LEVEL III PREPARATION /ADAPTATION
REASSESSMENT
TEACHING/LEARNING OBJECTIVES.- . . .
SUBSTANTIVE INFORMATION _ _
.......
The Future of Small Business 45
Advantages of Being Small .. . ............. ............ . 55
Changes in Consumer Behavior 57
Economic Conditions and Small . 60
Small Busieas AdnUnistration ...... ............... . . ..... 64
ACTIVITIES 69
Asscssmen. . ....... . . . . . . 69
Postassessment-- 70
SELF -- EVALUATION 70
BIBLIOGRAPHY73
SOURCES TO CONSULT FOR FURTHER INFORMATION
iv
FOREWORD
Traditionally vocational education ,:as been geared primarily
to preparing students for employmentto preparing employees.Yet there is another career path available; students can learnhow to set up and manage their own businesses. They can become
entrepreneurs.
Vocational education, by its very nature, is well suited todeveloping entrepreneurs. It is important that entrepreneurshipeducation be developed and incorporated as a discinct but integralpart of all vocational education program areas. A Program forAcquiring Competence in Entrepreneurship (PACE) represents a wayto initiate further action in this direction.
The strength behind these instructional units is the interestand involvement of vocational educators and successful entrepreneursin the state of Ohio and across the nation. Special recognition is
extended to the project staff: Lorraine T. Furtado, Project Director
and Lee Kopp, Program Associate. Appreciation is also expressed tothe many who reviewediand revised the drafts of the units: Ferman
Moody, Hannah Eisner, and Sandra Gurvis, We owe a special thanks tothose consultants who contributed to the content of this publication:Carol Lee Bodeen, Louis G. Gross, Douglass Guikema, Peter G. Haines,Philip S. Manthey, Charles S. McDowell, Mary E. McKnight, Steven R.Miller, Barbara S. Riley, Barbara A. Rupp, Ruth Ann Snyder, Robert L.Suttle, Florence M. Wellman and Roy H. Young.
Robert E. TaylorExecutive DirectorThe National Center forResearch in Vocational Education
HOW TO USE PACE
A Program for Acquiring Competence in Entre.teneurship(PACE) is a curriculum responsive io the need for instructionin entrepreneurship. ,It is primarily for postsecondary level,including four year colleges and adult education, but it canalso be adapted for special groups. PACE is divided into threeparts (1) Getting Ready to Become an Entrepreneur, (2) Becomingan Entrepreneur (establishing a business), and (3) Being anEntrepreneur (operating a business).
Each of the three parts hasrelate to that topic. Within thinto three levels of learning:cion/Adaptation. These levels
complex concepts
set of instructional units whichese units, the material is organizeLiExposure, Exploration, and Prepara-f learning progress from simple to
The level=; of learning will enable you to use the PACE materialsto suit youe individual needs. You may find it best to work withthe exposure level of one unit and the exploration level of another.Or, you may choose to pursue one level throughout the entire series.You might also want to work through two or more levels in one unitbefore going on to the next unit.
Before beginning a unit, discuss with your instructor what levelor levels of learning in that unit are most appr)priate to you`~ goals'and abilities. Read the unit overview and look through the pre/post-assessments for the three levels to help you in your choice. Also
check the list of definitions you might need to look up or researchfor that level.
When you are ren v to start, to the level you have chosen,he preas me id ir'ntily those items which you feel need
special attention in the unit. Also look at the learning objectives:they will tell you what you should be able to do by the time voltfinish that level of learning.
As you rea6.the substantive coi_el portion of each level. Use these questionsto -ide -flur reading.
'1 not questions in the margins alongside
At the end of each level of learning are activities which helpyou become involved with the content presented in the unit. You andyour instructor can decide on how many activities you should do; youmay want to do several or you many need to do all.
vii
Thun, evaluate Yourself. Is there any material that riedto review before you take the postassessment? The difference in vc7,urfl-twcrs on t Lie pre/postassessments sho'Ad show vco )w uh oii hovegrwn in your know! edge of untrupronourshin.
When you and vour instructor feet that you have successfuJiycompleted that level, you are ready to begin :mother level of learning,either in the same unit or in another.
viii
OVERVIEW OF THE UNIT
This unit focuses on defining small business. Is a businesssmall because of the number of workers it employs? Because grosssales are under a certain dollar amounts Because of the squarefootage it occupies? Is American Motors Companvassmall businessbecause it is smaller than General Motors, Ford, and Chrysler?
Since regulations affecting the operation of enterprises areoften based on business -ize, it is important to know what standardsare used to identify small businesses. Information included in theunit will give you insight into different types of small businessesincluding wholesaling, manufacturing, service, and retailing busi-nesses; and the impact small businesses make on our economic sys_am.
An in -death examination of the scope and trends of smallbusinesses, start-up costs for typical businesses, and the futureoutlook for small businesses are included in this unit. The unitalso provides a brief discussion of the causes of business successand failure, and examines_ the asks of the entrepreneur.
The material in this unit is intended to prepare you to betteranswer the questions, "What is a small business?" and "How importantis small business to our eocn: "
DEENITIAS TO KNOW BEFORE YOU BEGIN
As you read through a level, you might find some unfamiliar words.
Listed below are sev.eral business terms used in each level. Know-
ing these before you begin might help you to better understand that
level.
capital supplies
demand
en.t rpreneur
fixed assets
franchise
EXPOSURE
free enterprise system sales volume
gross national product service
profit
retail
snail busi
supply
wholesale
EXPLORATION
capital requirements free enterprise service enterprise
gross national product small business
inflation sole proprietorship
disclosure inventory supply
discretionary income market economy undercapitaiization
entrepreneur recession wholesaler
franchise sales volume
demand
depressed market
conglomerates
consignment
demand
franchise
.i4rcss
info zion
discretionary income inventory
entrepreneur recession
PACE
PATH OF STUDY
PART I - GETTING READY TO BECOME N' ENTREPRENEUR
YOU ARE HERE Unit I A Nature of Small Business
Unit I B
Unit I C
PART II BECOMING AN ENTREPRENEUR
Unit -II A
Unit II B
Unit II C
Unit II D
Unit II E
Unit II F
Unit II G
PART III - BEING AN ENTREPRENEUR
Unit III A
Unit III B
Unit III C
Unit III D
Unit III E
Unit III F
Unit III G
Unit III H
EXPOSURE
PREASSESSMENT
PART I UNIT A
NATURE OF SMALL
BUSINESS
Here are some questions that test for knowledge of the contents
of this level. If you are very familiar with the information needed to
answer them, perhaps you should go to another level or unit -- check
with your instructor. Otherwise, jot down your answers. After you've
read through this level, take the postassessment at the end of the
"Exposure Activities" section and measure what you've learned.
What is a small business?
2. What causes businesses to fail?
How important is making a profit?
How important are small businesses in today's
economy?
What advantages do small businesses have?
1
TEACHING/LEARNING OBJECTIVES
Upon completionof this level of instruction, you
should be able to
1. Define small business.
2. Identify some of the factors used in defining
a small business.
Explain what is meant by "the profit motive."
Define profit, supply and demand, and freedom
of choice.
Describe the role of small business in our
economy.
6. Name some of the major causes for business
failures.
2
Part I, Unit ANature of SmallBusiness
Part I, Unit ANature of SmallBusiness
SUBSTANTIVE INFORMATION
DEFINING SMALL. BU SIN
What is a small business? Most of us would probably
agree that the neighborhood ice cream parlor is a small
business, while General Motors is a big business. However,
the real problem in defining small business is not in dis-
tinguishing the ice cream parlor from General Motors, since
these are two extremes. The problem arises when we compare
Jacobs Printing Shop and Ink, Print. A firm considered small
business in one industry might be big business in another.
A firm the Size of-American Motors would probably be a giant
in the faSt copy printing business, yet it is a very small
business compared to General Motora and Ford. The'basic
questiOn, then is, "How big does a,husiness need to be
before it is no longer a small business ?" Most definitions
of small business answer this question and are based on
measures, such as the number of employees, the annual sales
'volume, and the type of ownership.
HOW CAN SMALL
BUSINESS BE
DEFINED?
f, Unit A-4,nre of Small
Business
Small Business Administration Definition
Obviously, determining a definition for "small" is not
a simple task. The- Sra.11 Business Adrhinistration (SBA) defi-
nition is perhaps the one most commonly used. The SBA describes
t
a Small bus- ,.mess as "one which is individually owned and operated
and not dominant in its field of operation."
In 1953 the United States Congress passed the Small
Business Act which authorized the establishment the Small
Business Administration. The SBA was originally a Korean War
progrom. that dealt - 4litary contracts which supplied
stall plants. The - aajor purpose is still to aid small
businesses in bidding on bovernment contracts.
For lts loan gram the SBA has established a " "size"
'-ste or to deermine "small." The size of the business
detxtrmines if the firm can borrow from the SBA. At the time
the Small Businoss Ac, was passed, .a whblesaler was
conslf!eled awn if t grossed five million dollars or
.7.ces5 ;eta al and service firms are considered small
tW.t an income is one million to five million
the type of business. In the construe=
_i,a -ESS, a fiPm is considered small if it does not gross
over 7.5 million dollars annually.
ARE THERE OTHER
DEFINITIONS FOR
"SMALL BUSINESS?"
Part 1, Unit ANature of SmallBusiness
In r anufacturing it is based on number of employeesand the industry. Apparel and textile companies areregarded as "small" if they have no more than 250
employees. For producers of aircraft and ammunition,the numNr is 1,500. In the service industries, thecriterion is dollar volume: a maximum of $5 millionfor department stores, groceries and auto dealers,and $1 million for most other retailers; $5 millionfor gene a1 contractors; and $5 million for most
wholesalers. To reflect inflation, the SBA is nowrevising the sales figures upward by as much as 10%.\(Business Week, June 30, 1975, p. 97)
Committee for Economic Deve ment Definition
One of the most useful definitions of a small firm was
developed by the Committee for Economic Development. The
committee asserted that to be considered a small business,
a firm must possess two of the following ch -acteris ics:
(1) T efirM must be independently managed, usually
by:!an owner / manager
The firm must be owned by, and receive.capiral
supplies from an individual or a small group
While markets need not be local, the firm must
maintain localized-operations; that is, the owner
and employees must live in\one "home" community
(4) When compared with the higg
industry, the firm must be
t firms in the
latively small. in
'size. (.Adapted from Meetin= the Seecial Problems
of Small Business, p. 14)
5
DO SMALL
BUSINESSES
AFFECT OUR
ECONOMY?
LL BUSINESS IN OUR ECONO
Part I, Unit ANature of SmallBusiness
Each business, whether it a retail, service, wholesale,
nuf cturing concern, has an impact on our economy. In
order to understand the role of small business in our economy
you will need to possess some knowledge of economics.
This unit is not designed to make you econo ists; however,
will provide you with at least a minimum understanding of
economic concepts and principles.
The field of economics is highly specialized and is
puzzling to many Americans. Economics is simply what you do
each day when you exchange a day's work for a day's pay and
when you exchange a day's pay for the goods and services you
buy. An economic system is the structure by which the country
combines its resources, labor, and skills to pro uLe allu
distribute the enormous variety of goods and services people
need and want. When you purchase a stereo system, you are
making an economic decision. That decision is as important
to you as the economic decisions made by businesses. As you
can see, even though "economics" sounds complicated, it is
something we engage in every day.
6
Part I, Unit ANature of SmallBusiness
Freedom of Choice
WHAT DOES In the early days of America, our government exercised little
FREEDOM OF control over businesses. ,Today, there is government influence
MICE MEAN on some business decisions. Yet we still have much freedom of
TN OUR economic choice. In our country all people have both the right
WONOMY? and the freedom to choose their personal goals and to decide
how their work and resources will be used. Any person can choose
to be self-employed.
WHAT IS THE
PROFIT
VOTIVE?
The Profit Motive
The growth (f our economy has been directly affected by the
vision and orginality of those who open new enterprises--by
entrepreneur=-, A free enterprise system such as ours dependent
on people:who start new enterprises for goods, services, and jobs.
Entrepreneurs take. on the risks of financing a business in
anticipation earning a return on their investment. The amount
of profit they actually earn can vary widely, depending upon such
factors as consumer demand, business costs, and governMent
policies.
7
Part 1, Unit ANature of SmallBusiness
Our economic system and business continuity is dependent
upon the profit motive. Profit is the difference between costs
of products or service s and monies received in return for their
sale, and is one of the main reasons for entering into business
and the reward for staying in business. The profit motive must
be a long-range rather than ,a short-range concern of every
entrepreneur.
Supply and Demand Factors
WHAT'S THE The principles of supply and demand are important in our
IMPORTANCE economy. Every day, you probably make decisions whether to buy
OF SUPPLY products and services. These decisions directly affect our
AND DEMAND? economy. Our willingness and ability to spend our money for certain
goods and services is called demand. Our demand for goods and
services affects the efficiency of producers. In economic terms,
stpnly_. refers to the quantities of a product offered for sale at
a given time for a certain price. 'Successful producers are those
who keep offering;the goods and 'services that buyers want. Supply
and demand forces ultimately determine the levels of production
and employment.
Citizen's Band (CB) radios are a good example of the
principles of supply and demand. When CB radios first hit the
market, the supply was limited and the price was-relatively high.
People were willing to pay a high price for the pvoduct that was
short in supply but large in demand. Now, supply exceeds demand,
and the prices are subsequently lower In other words, CB
8
Part I, Unit ANature of SmallBusiness
J-)
radios have been manufactured in such great quantities that now
the market demand is not as great us it was at first and prices
have beome relatively low.
The Cuisinart food processor is another example of supply
and demand.
In the end, Jontheimer's Cuisinart food processorcreated a whole new segment of the kitchen applianceindustry, a segment so promising and growing soexplosively that a host of imitators rushed ir; withmachines.of their own, most of them at lower prices:Farberware ($$9.99), American Electrid ($60), Waring($180), Hat 'lton Beach ($89.95) .
The new competition could hardy fail to out intoCuisinarts' market, some with 'good products, someith what Sontheimer dismisses as junk, but at the
moment the demand is growing so rapidly and Sontheimer;has been so iusy meeting the demand he hasn't had to !
worry about competitors. "Our sales keep climbing,"he says. "Our marketing director says our competitorshave given the public a basis for.comparison."
What doe's all this amount to in dollars. Not a greatdeal--yet. Combined, the various manufacturers pro b-ably sold 500,000 units last year, and Sonthcimer'scompany, of which he and his wife own 1002, had atLeast half of the market, which is interestinguin itsown right: that the most esrensive produce should bethe best seller. Altogether, Cuisinarts sold about$50 million worth of processors last year. But whatthe profits are Sontheimer resolutely refuses to say."I'm here to stay--even when demand does peak"--andcites lie 5 million blenders sold in the U.S. everyyedr, though the market has long since matured.
(Forbes,.March 6, 1978, p. 66) Reprinted by permission: Forbes Magazine from the March 6, 1978 issue.
Part I, Unit ANature of SmallBusiness
NUMBER OF SMALL BUSINESSES
difficult to say. exactly how many small businesses
there are in the United States. People with regular jobs often
have a small business that is operated seasonally or on weekends
and evenings. An example would be a concessionaire who operates
a food stand at state and county fairs or similar functions. A
full-time small business could be run by a person who buys
jewelry in Mexico, then returns and sells it to nearby businesses.
This individual is the buyer, seller, distributor, creditor, and
bookkeeper--in other words, the business is striCtly a one-person
operation.
There are approximately nine million part and full-time
small businesses in the United States. A quarter of a million
new buSiness are started each year. Fewer than one-half of
A1% employ as many as twenty-five hundred employees. There are
mare small businesses today per one thousand population than
at any other time in our history.
On the other-hand, cannot'ignore the fact that the few
very, very large businesses--those who have one thousand or
more employees - do provide approximately 4Q% of the total paid
employment. There is no doubt that the giant corporations
have essential role in our economy. But the small firm still
remains a dominant factor in our economy in terms of number of
business units, vnlumeof business, and the percentage pf paid
employment.
10
ARE SMALL
BUSINESSES
MORE IMPORTANT
IN SOME
INDUSTRIES
THAN IN OTHERS?
Part I, Unit ANature of SmallBusiness
Prevalent Small Businesses
Small businesses are relatively more important in certain
industries than in others, with retail stores constituting the
largest number. It is difficult to generalize about service
businesses such as dentist, vacuum sweeper pool service and
dry tleaners because they differ so greatly in operations and
type of services provided. S ;fall wholesale firms also encom-
pass all types of establiahmen:s selling a wide variety of
products. Big business is strongest in manufacturing.
Over half of all the new small businesses that open each
year are retail organizations of some type, including restaurants.
New franchise outlets account for 5-10% of new businesses
Service and recreation fields such as campgrounds, motels,
instant printing centers, platement centers, and indoor tennis
courts are expanding the fastest.
SMALL BUSINESS RISKS
Being an entreprene4r seems to be a dream of many Americans.
BUSINESSES Unfortunately many of these dream@_. don't last long. Experts say
FAIL? the smaller and newer business is the more likely it to fail..
More than half the firms that go out of businessannually have been in existence for five years orless: the vast majority have annual sales of under$1 million. The reasons for this situation aresimple: small businesses typically Zack the capitaland management know-how to cope with the adversedevelopments that all concerns face. (The WallStreet Journal, November 29, 1977, p. 1) Reprintedby permission from The Wall Street Journal,(E)DowJones & Company, Inc. 1977. All rights reserved.
11
ARE THERE
ADVANTAGES capitalize on it.
ID BEING
."SMALL"?_
Part I, Unit ANature of SmallBusiness'
Many beginning entrepreneurs lack specific training in sales and
accounting and are unused to thinking in terms of profit. The most
common reasons for business failures are:
LarA of experience
Lack of money
Wrong location
inventory mismangement
Too much capital in fixed assets
Poor credit-granting practices.
VANTAGES OF BEING A SMALL BUSINESS
Many small businesses confider their size to be advantageous and
We can be more flexible, can move more quickly, andconcentrate on smaller segments of markets, notesDavid Bigelow, president of R. C. Bigelow Co., aNorwalk (CT.)- vaned specialty foods outfit thatgrosses about $10 million a year.
Bigelow's most successful product is a spiced tea,Constant Comment. General Foods had a competitivebrand that was abandoned. Now Bigelow is battlingGE again in spiced- and fruit-flavored instantcoffees. This time, Bigelow concedes, 'General Foodshas flattened us out a bit.'
Nevertheless, Bigelow is bullish about the futureof small business. '1 feel the large corporationsare failing in this country, leaving opportunitiesfor small specialty companies," he says. "Big
manufacturers are making such bad products. Thebig, discount-type retail operators run storeswhere no one gives a damn about the customer.there are opportunities for small businessmen-But it takes a strong individual to handle them."
(Business Week, June 30, 1975, p. 97)
12
WHAT
cH446cTora---
DOES AN
ENTREPRENEUR
POSSES...,
Part I, Unit ANature of SmallBusiness
Small businesses can he very adaptable. They can quickly
react to general economic conditions and competition.
EntreLeneurs and _Optimists
There are many who believe that success u1 entrepreneurs
have some unique personal characteristicscharacteris
which those who are employed y others do not possess. Some
people believe that the entrepreneur's peronality an 1,),, a
key to the success or failure of the business. Understanding
the basic nature of entrepreneurs can provide you with some
sight that will allow you to begin to conduct an assessment
yo__ entrepreneurial inst c
An entrepreneur is an optimist 7)71 definition, andoveroptimism is What does companies i,n, assertKenneth Eaton, head of Associated Business Consul-tants. "When things are going weal, the averagebusinessman assumes they will continue to go well.When a-problem arises, he assumes it wiZZ go awayquickly by itself. By the time he wakes up to thefact that he really has a problem, it's oftenlate to do anything about it." (The Wall StreJournal, November 29 1977, p 1) Reprinted byNovember
7 P.
permission from The Wall Street Journal _ow
Jones & Company, Inc. 1977. All rights reserved.
There are hundreds of businesses that were started with
only a few thousand dollars that were worth millions of dollars
within a few years. Many entrepreneurs have become millionaires,
such as Frank Carney of Pizza Hut, who started with $600;
Rocky Aioki of Benihana, who began with a borrowed $10,000;
and Bob Wran Bob's Big Boy, who, as a teenager, bought his
first hamburger stand for $350.
13
Part I, Unit ANature of SmallBusiness
if you are curious about your entrepreneurial attitude ,
try the fir Ft ;!-sses- under "Exposure Activi=-les of
level.
Part I, Unit ANature of SmallBusiness
EXPOSURE ACTIVITIES
There is no single definition of small business - several factors
are used Now chat you have read about some of these factors and
about small businesses, try these activites.
ASSESSMENT ONE
The questions below are designed to tell you something about
your entrepreneurial attitudes.
HAVE IHE RIGHT -TITUL
y Harns
free eoen1 wo:47d 7:ost 7
a) watch TVb) visit a frtendc) work-on-a hobby?
2. On your daydreams, would you most likely appear as
a) a millionaire ,floating on a yachtb) a detective who has solved a di:- cult casec) a politician giving an election night victory
speech?
3. To exercise, would you rather
a) join an athletic clubh) join a neighborhood team
do some jogging aeyour own pace
4. When asked to work with others on a te which wouldyou anticipate with most pleasure:
a) other people coming up with good ideasb) cooperating with othersc) getting other people to do what you want
5. Which game would you rather play?
a) monopolyb) roul&toc) bingo
15
Yowemfriloyer as you to
a) takeh) won't take it bec) give him an answer
mor
In school, were 71ou
field k
b) papersc) exams
In buy zg a refrigerator woul
Part I, Unit ANature ofSmall Business
Cv t
a) stay within an established, well-kw, brandb) ask your friends what they boughta) compare thoroughly the advantages of different brands
While on a business trip in Europe you are late for anappointment with a client in a neighboring town. Yourtrain has been delayed indefinitely. Would you
a) rent a car to get thereb) wait,for the next schedulel trainc) reschedule the appointment
10. -Do you believe that people you know who have succeeded inbusiness
a) have connectionsb) are cleverer than-youc) are about the same u but make work a little harder
11. An employee who is your friend is not doing job. uoz
a) take him out for a drink, hint broadly that things arc,i tgoing right and hope he gets tku message
b) leave him alone and hope he straightens outc) give hire a strong warning and fire him if he doesn
shape up
12. You come Fame to spend a relayingyour toilet has just overflowed.
r) study your horn
yourselfpersuade a handy friend to
Part I, Pnit ANature of Sm::111,_
Business
book to see
,'1Z7,Th,f7YJ
2s. Do you en,loy playing cards mos
How
a) play with good friendsb) play with people who ciLc) play for high stakes
You operate a small .:iffice-cleani
friend and competitor suddenly diWould you
,e
ou can
g business . A close
s of a heart attack.
reassure his wife that you will never try toaway anu customers
b) propose a mergergo to your former competitor's customers athem a better deal
well do you think you did? Turn this page upside
7
down to
check your answers. Now score your paper. Are you a potential
entrepreneur?
Z1 !3 'IT '01 '6 !D
.0
!a E
Score .one point for each correct answer. Questions
= suggest whether you are a realistic problembusiness without constant help from others.
8 probe whether you take calculated risks andfore you act. Questions 4, 10, 13 and 14 showhe classic entrepreneur, find other people most_y help fulfill your need to win. Question 11
take responsibility for your destiny-7and youre between 11 and 14 pointS, you could haye-d. If you score from seven to ten poin
business idea or a lot of money toseven or less, stay where you are.
1, 2, 3, 7, 9 and 1solver who can runQuestions 5, 6 andseek information bwhether you, likesatisfying when treveals whether yobusiness.- if youa good chance to suacyou'd better have a supehelp you out. If you scar
(Money. March 1978, p. 52Money Magazine by special pe-.
reserved.
Reprintedmission;(
17
rom the March 1978 issue f-
978, Time Inc. All rights
Part I, Unit ANature of Small
Business
ASSESSMENT TWO
1. List five products thzt have entered the consumer market
within the last five years. Explain how you believe the
factors of supply and demand have affected the price of each
product.
2. Describe how the Committee for Economic Development and Small
Business Administration differ in their definitions of a
small business.
POSTASSESSMENT
1. Describe small business using the Small Business Administration
(SBA) definition.
Identify three of the most common reasons for business
failures.
B. Explain the importance of a business making a profit.
4. Describe the importance of small business in our economy.
5. Identify two advantages of being a small business.
Compare your answers to your responses to the preassessment.
You may want to check your postassessment answers with your instructor.
Part I, :rift A
Nature of SmallBusiness
SELF-EVALUATION
How well did you know the information needed to do the activities?
Very well
( ) Fairly well
( ) A little
Be honest with yourself. If you feel you don't know the material
well enough, it might be helpful to review L.zi.: ectien before
on.
19
EXPLORATION PART I) UNIT A
NATURE OF SMALL
BUSINESS
REASSESSMENT
Here are some questions that test for knowledge of the content
of this level. If YOU are tier *: the 5flformatien nee
answer them, perhaps you should go to another level or unit -- check
th your instructor. Otherwise, jot down your answers. After you've
read through this level, take the postassessment at the end of the
"Exploration Activities" section and meaoure what you've learned.
1. Why is business competition so basic to our economy?
2. What do all small businesses have in common?
3. What is a small business?
4. How do small manufacturing firms, retail businesses,
wholesale enterprises and service establishment
differ?
Describe the biggest problems small businesses have today.
21
Part I, Unit ANature of Small
Business
TEACHING/LEARNING OBJECTIVES
Upon completion of this level, you should be able
to:
1. Explain the major groupings of small businesses,
their importance to our economy, and specific
problems each group faces in terms of failure
rates.
2. Explain the reasons why it is difficult to define
small busizess.
Identify the characteristics of small businesses.
4. Discuss the importance cf small business.
5. Describe how supply and demand work in our
economy.
6. Describe competition in our economy.
22
IMF
ARE SitiAL__,
BUSIjESSESF
SUBSTANTIVE INFORMATION
UNDERSTANDING S
To determine the importance of small business to our
economy, consider these quescior:
(1) When is a business "small"2
(2) is curber
declining.
Keep these questions in mind as you read about the _i_f,rent
types of firms discussed in this level.
Understanding the small business in our economy is diff
cult. Since most small businesses are sole proprietorships,
they are not required by law to adhere to disclosure rules
which apply to big companie that are normally publicly owned.
July 1973, Chase Revel ran an ad in The Wall street Journal
Parr I_ Unit- A
Nature of SmallBusiness
which read, "Insider's Report. How much profit doe,=;
business make (exactly). Any small business. Case history,
details, including how to start one. Chase Revel was shocked
to find his $45 ad resulted in $2,000 in subscript-nns. At
that time he hadn't even published a single copy of the periodi-
cal. Obviously information about shall businesses was in demand.
...Insider Report soon began rol7ing off the rrerm-rr.It contained reearf-T, , .tail 7 business oppor-tunities and expose schemes designed to separatewould-be businessmen from their cash.
DO SMALL
BUSINESSES
HAVE ANYTHING
IN COMMON?
WHAT ABOUT
SMALL RETAIL
BUSINESSES?
1 he nublication's naTe Lias;:nt-oepreneurs maaazin_ _ _
to the insemPd like
His oriainal
the r,taga
30,000,
zanged to
severalvt name and Zen;/
Circulation has grcmnstment in the putt
Part I, Unit ANature of SmallBusiness
The -- ,o +s have ioverea unusrt ludin balloon vendors, sea urc'
rental, telling people off by proxypainting, and rent-a-sheep. Revel hasbusinesses which you can start with le(The Los Angeles Times, July 17, 1977,Reprinted from The Los An -les Tines.
icking,overnight o:
a 7ist of __than v,,000.
Part IV, p. 11
Today Chase Revel is director of Interne
neur's Association, a management consultant
onal Entrepre-
He has
authored six books on starting small businesses and is the
editor of International En e reneurs magazine.
TYPES OF SMALL BUSINESSES
The size-of a business is more important in ce ain types
of businesses than in others. In general, it seems that small
businesses predominate industries characterized by the following:
initial capital requirements are low
highly technical skills are not necessary
potential market is highly centralized
Small Meta 1 Businesses
Retailers are the biggest group of small businesses.
They represent about 40% of the 9.4 million small businesses.
The retail group includes but is not limited to, florist,
grocery stores, drugstores, restaurants, fast-food establish-
ments, gas stations, and hardware stores.
24
WHAT ABOUT
SMALL 'SERVICE
BUSINESSES?
Part 1, Unit ANature or SnailBusiness
Over half of the small businesses started last year
retail operations of some type. Grocery- stores had the lnest
sales volume followed by automotive dealers, general merchandise
scores, and eating and drinking t_,,aces. restaurants. grocers
stores, and dcpartme 7t stores en to the most workers. Retail=
franchise outlets account for 9-107: of the new retail businesses.
Small Service Businesse .1
The second largest group of small businesses are service
enterprises. Services can be tangible or intangible and are
either provided at customer's home or at the place of
business. Examples of service enterprises include lawn care
specialists, dry cleaners, beauty and barber shops, accountants,
travel agencies, and janitorial service companies.
Both service and recreational enterprises are growing.
Campgrounds, motels, instant printing centers and indoor tennis
and racket clubs am opening up very rapidly. Discretionary
income, the amount of money consumers have to spend after paying
f ilbasic food and shelter, has increased. Therefore, the
number of businesses offering personal services has grown be-
cause people are more willing to pay for :hem. However, more
failures occur in the service area than in any other type of
business, with the exception of retail. About half of the new
service businesses survive only eighteen months.
SMALL
WHOLESALE
BUSINESSES?
Part T, Unit ANatura of SnailBusiness
mall Wholesale Businesses
The wholesale trade is the third largest group.
Wholesalers perform a valuable service to businesses in the
manufacturing and retail industry. Wholesalers are middles
persons who move goods between manufacturers and retailers
for all types of businesses including groceries, drugs, ha=d-
ware, and petroleum products.
Wholesale businesses can be grouped into three major types
based upon their operating characteristics:
(1) Merchant wholesalers
(2) Manufacture sales branches
(3) Merchandise agents and brokers
Merchant wholesalers are those who typically sell many producers`
goods to a variety of retailers, manufacturers, service fir
and other holesalers through warehouse facilities. They are
involved in bu.ing and selling goods at wholesale cost. The
term "at wholesale" means they do not ordinarily sell to ulti-
mate consumers. Merchant wholesale firms are the most important
type in terms of both sales and number of establishments.
Manufacturer's sales branches normally owned by large firms
and sell only the manufacturer's products. Merchandise agents
typically represent a few select companies and do not provide
warehouse facilities.
26
WHAT ABOUT SMALL
MANUFACTURING
BUSINESSES?
Part I', Unit A
Nature of SmallBusiness
Small Manufacturin Businesses
Manufacturing businesses are the fourth largest group of
small businesses. They include furniture and apparel manu-
facturers, bakeries, toy manufacturers, and any other type of
business that converts raw materials into usable products for
purchas4 by ultimate consumers and industrial users. Small
business is less prevalent in the manufacturing industry.
large initial investment in tools,-.equipment, and fixtures
.usually required to set up a manufacturing firm prevents the
establishment of many small businesses.
Sixty percent of the total number of workers in manu-
facturing jobs are employed :n one of 'three manufacturing
industries: machinery, other than electrical ani transportation
equipment; electrical and electronic equipment; and food products.
Although the number of small manufacturing firms is the smallest
group, compared to retail, service, and wholesale; the importance
of small manufacturers shouldat be underestimated. Small
manufacturIft firms provide big businesses with he goods they
need to produce finished products. They also produce many
"speciality" products that big businesses find too expensive to
manufacture.
WH42' ARE THE
OPPORTUNITIES
FOR OPENING A
SL BUSINESS?
Part I, Unit ANature of SmallBusiness
OPPORTUNITIES AVAILABLE
Are the opportunities for opening a successful business
the same in all industries? Recently, 1,11e1 magazine surveyed
twenty-six bankers, profesiors in school of business, Small
Business Administration agents, members of Servide Corps f
\
Retired Executives, and executives of small business inveStment
companies. They were asked to identify from a list of eighty-
one most, common small businesses those they felt had the best
'chance to succeed and those with the highest potential for
failure. According to the survey results reported in the
March 1978 issue of Money, the ten businesses most likely to
succeed are: building material stores; auto, tire and
accessories stores; liquor stores; sports and recreation clubs,
funeral homes and crematories; seed and garden supply stores;
sporting goods manufacturers; engineering; laboratory; and
scientific equipment manufacturers; hardware stores; and office
supplies and equipment stores.
The ten riskiest businesses to open according to hip_tlez
magazine's survey are: local laundries and dry cleaners, used
car dealerships, gas stations, local trucking firms, stauran
infants' clothing. stores, bakeries, machine shops, grocery and
meat stores, and car washes.
28
HOW MUCH CAPITAL
DOES IT TAKE TO
OFENT A BUSINESS?
Part 1, Unit ANature of SmallBusiness
GAgt1 Required
Some small businesses can be opened with a small investment.
Others require large amounts of capital. Regardless of how much
is needed, however, having enough capital is crucial if the
business is to succeed. Any business needs enough capital to
cover initial expenses including inventory plus operating expenses
until the business begins to make a profit. Undercapitalization
is a major reason for business failure.
Since you are aspiring to be an entrepreneur, you will
need to consider how much money it,will take to get your
business started. Generally speaking, opening a retail or
service type business requires less initial capital than a
manufacturing firm. Since a large capital investment is usually
required for equipment and machines, manufacturing firms are
most difficult to start up.
A number of hurdles confront he aspiring youngscientific company. The flow f investment dollarshas been diverted from the risky to more estab-lished. Equity financing has nearly dried up andmost Small BusinessAdMinistration loans are goingto retail and service firmms.
Inflation is another major barrier. It's estimatedthat today it would require $10 million to launcha company such as Intel Corporation, the semi-conductor concern that was founded a decade agofor $3 million. Data General Corporation, theminicomputer maker, opened its doors in the 1960for about $800,000; today's cost would be about5`5 million. (The Wall Street Journal, November 17,1977, p. 1) Reprinted by permission form The WallStreet Journal Dow Jones & Company, Inc . 1977.All rights reserved.
29
Part 1, Unit ANature of SmallBusiness
Changing Times has estimated "start-up costa" for
several types of small businesses. The figures below will
help you decide if you can Afford to become an entrepreneur
and may provide you with ideas as to where you might get the
money needed.
THE/ MONEY IT TAKES TO GETA:SMALL BUSINESS GOING
Type of Businessand
A n aZ Gross Sal
BUiZding Maintenance--
Service'
Inver gentIn
Inventor
Total CapitalInvestment(For Start-UpAnd 'First Three
Onths' 0 -a- ion)
$25,000 to $75,000
Plant Shop
$8 000 to000
$25,000 to $80,000 $5,000 to $11,000 to$10,000 824,000
Bookstore$75,000 to $100, 000 $12400 to $25,000 to
$2a, 000 $53, 000
Beauty Salonunder $20M00 815,000 to
829,000
Yarn Shop$50,000 to $100,000 $8,000 to 826,000 to
$12, 000 825,000
30
Type of BusinessAnd
Annual Gross Sales
InvestmentIn
Invento
Total CapitalInvestment
I-or Start-,Upp
FirstMonths'
ThreeOperation
Repair Service $10,000 toFurniture $20,000
Car $15,000 to$40,000
TV/Radio $10,000 to
$25,000
Applicance $6,000 to$20,000
Clock/Watch $8,000 to$12, 000
Shoe $15,000 to$25, 000
Business Machine $6,000 to$10, 000
Bicycle $6,000 to$10, 000
Contractors --(Plumbing,
Carpentry, Electrical Etc $10,b_$30, 000
Equipment Rental Service$50,000 to $20i'000
Camping/Recreation $7,500 to $15,000 to$15, 000 $25, 000
Soft Goods (Party, Sickroom) $12,500 to $25,000 to$21,000 $35,000
Fabric Store
$100,000 to $200,000 $25,000 to 100 to$35,000 300
Hobby/Crafts StoreUnder $200,000 $20,000 to $36,000 to
$30, 000 $56,000
Based on data in Bank of America's Small Business Reporter Series. ( Changing.Times, August 1977, p. 40) Reprinted by permission from Changing Times TheKiplinger Magazine, August 1977. Copyright 1977 by The Kiplinger WashingtonEditors, Inc., 1729 H Street, NW, Washineton, DC 20006.
31
part I, Unit ANature of SmallBusiness
CHARACTERISTICS OF OUR ECONOMIC SYSTEM
To be a successful business owner, it is important to
WHAT ARE THEknow as much as you can about the business field and have a
CHARACTERISTICS/ good working knowledge of Our economic system.
OP OUR ECONOMY?
HOW DO SUPPLY
AND DEMAND
WORK?
Imagine a big machine with many parts -- that's our economic
system. The system - -the machine-- depends on entrepreneurs to
start new enterprises which will provide the parts--new goods,
services, and jobs. Consumers who'need goods and services and
are concerned with 'quality, style, and savings are another part
of the economic'machine. Federal, state and local government
agencies that promote the safety and welfare of the public, and
provide services in the public interest are still another part.
Free enterprise involves voluntary cooperation among pro-
ducers, consumers, and government. Our free enterprise system
is a "market economy". ,conomies depend on economic
decision-Making by, three groups--producers, consumers, .and govern-
ment. Their decisions:a are guided primarily by the interplay of
buyers and sellers in the marketplace. The real regulators of
our market system are supply and demand.-
fmulianARmni
As consumers we have needs and wants. The importance or
extent of our want: f ines the price we are willing to pay
for products or services. If producers have only a limited
supply of the desired goods and services, prices will be high.
32
part 1, Unit ANature of SmallBusiness
Other producers will recognize our demands, will realize that
they are not being adequately met and will begin to develop
similar versions of LIne popular goods and services.
The Cuisinart story is an excellent example of supply
and demand factors at work.
Last Christmas, department store chains andgourmet cooking shops everywhere were selling emptyboxes--worth $255 apieceand doing a land -offIcebusiness. The empty boxes were, of course, to befilled - -as promisedwith the first Cuisinart foodprocessors the store got in stock. "We were justtotally unable to keep up with demand, saysCuisinarts' President and principal proprietor CarlG. Sontheimer, 63. "Every machine we get now goestoward redeeming those empty boxes. So the firstfour months will be tight, but after that we willbe all right."
The empty box promotion is typical of the kind ofrunaway success Stamford, Conn.'s Cuisinarts, Inc. hashad since Sontheimer first introduced his revolutionarynew food processor at the Chicago Housewares Show inJanuary Z973. "This is a generalist machine in anage of specialty machines," Sontheimer says. TheCuisinart shreds, grates,.grinds, slices, kneads,mixes and chops just about anything you'd care to dumpinto it, replacing most of the other appliances you'dnormally keep in the kitchen.
Na vast advertising and promotion campaign launchedthe Cuisinart; it was the old story of the bettermousetrap. The processor first made its way mainlyby word of mouth, and then won the imprimatur ofgourmet gums like James Beard, Craig Claiborne,Julia Child, and Gourmet magazine. The Cuithinart-lecke, sated's, and comes on as French, but thecompany, like its proprietor, is as American aschop suey or apple pie, and so is its success inbuilding a major new market in competition with
HOW DOES
COMPETITION
AFFECT THE
ECONOMY?
Part I, Unit ANature of SmallBusiness
giants. A mild-mannered rather rumpled-ZOoking man
of gargahnuan girth, Carl Sontheimer is no consumer-
goods whizbang. He's a physicist trained at the
Massachustf:: 1115t161e of Tadsology, an eZe.trvni.cengineer, an entYepreineur and colvoratiem executive.
an inventor and a self-styled cooking nut. -Ind
was all these talents, experience and proclivities
that went into making Cuisinarta one of the most
succer.Via new finesses in America today. (Forbes,
March 6, 1978, Reprinted by permission of
Forbes Magazine fr larch 6, 1978 issue.
Competition
Competition is basic to our economic system. Competition
kes our economy what it is--a system of free enterprise.
vitality of our economy is based on competition between
reducers. Those who supply the best goods and services at
t/the best prices generally. will be most successful. Businesses
compete in several different ways. Lowering prices, giving
more favorable credit terms, improving the quality of goods
or services, and developing new features not currently availLble
from others are all strategies to meet competition. Producers
selling basically the same goods or services must try
attract customers by offering services or benefits.
Businesses that are unable to compete in terms of prices and
quality are not usually very successful.
Competition benefits consumers as well as producers. It
has aided the consumer by requiring the seller to improve the
product, produce the product more efficiently, and _operate the
business more effectively to cut costs while preserving quality.
34
Part I, Unit ANature of SmallBusiness
Consumers gave never before had the choice and variety of
products and services they have today. Since consumers benefit
from competition, our government has traditionally sought
maintain, a competitive business environment by:establishing
laws or regulations intended to prevent abuse. The first
legislation Congress passed regulating business was the Sherman
Anti -Trust Act in 1890. The objective was to prevent two or
more entrepreneurs from restraining trade. Use of government
regulation to maintain competition in many areas of business,
such as food, transportation, and energy, is an ongoing debate.
Competition often leads to the development of new products
and brings about great technological advancement. Consider
some of the new products that have come into being in the last
few years. Microwave ovens, food processors, small hand cal-
culators, inicomputers, pantyhose, and all types of froien foods
are all representative of the constant change caused by competi-
tion. For example, there is probably no industry that changes
more rapidly than the woman's fashions. Fablok Mills of Virginia
quickly learned the impact fashion changes have on business.
Fickle feminine fashion has forced closure of atextile plant here which manufactured materialsfor panty girdles, now largely supplanted by theubiquitous pantyhOse.
James F. Yleshman, manager of Fablok Mills ofVirginia, Inc., said the plant's closing wassimply a matter of changing styles and notenough den -and for the product.
35
4 c)
1
Part Z, Unit ANature of SmallBusiness
Industry spokesmen said minis s and panty-
hose have made panty girdles e"ther obsoleteor much shorter, with a result at muclz less
'f the stretch fabric is require
In addition, it was pointed out, y wearers ofpanty girdles used them as a device or holding up
conventional stockings as much as then did tocontrol excess poundage on the anatomy. With
the advent of pantyhose, they said; the tirdies
were simply abandoned.
&Kok Mills began operation here only 14months ago. Last week the company handed ofinal paychecks to its last 33 employees.
Yleshman said the parent company fablok Mills,Inc. of Murray Hill, New Jersey, has no plans
for reopening the Louisa, Virginia plant.
(The Columbus Dispatch, April 5, 1970, p. 41)
Jeannette Orel has also discovered what competition
means in our economic system.
This is the story of a woman who has spent thepast four years perfecting a smokeless ashtra!l_-The moral is that it isn't easy being anthese days.
Jeannette Orel didn't really understand that whenshe started out, she just wanted to do somethingabout air pollution and figured a smokeless ashtraycould be her contribution.
Convinced that the public was ready for such aproduct, she also was hoping to make some moneyoff her idea, but there were a couple of thingsshe didn't count,on.
One was that it's not as easy to invent a smoke-less ashtray as she had thought. The othe. wasthat she might run into competition.
Because Ms. Orel hung in there when the goinggot tough, smokers and non-smokers non) have theOriginal Smoke Trapper Smokeless Ashtray. Itsells for $19.95.
36
WHAT
PROBLEMS
DO SMALL
BUSINESSES
ENCOUNTER?
Part I, Unit ANature of SmallBusiness
The free enterprise system works its wonders inpredictable ways, however. One large companyspecializing in home gadgets, Ronco, introduceda similar contraption last year, selling forabout half the price of the Orel device.
But that was just the beginning of competition.Last month, tennis star Billie -,Yrn Kingannounced plans to market anot wkeleashtray designed by he, 'zusband ( ,-led theClean Air King. And t;- may be others on theway.
All that, of course, might be seen as justanother blessing for the American consumer.But, it's upsetting for Ms. Orel, whosebusiness is faced with competition from morefinancially powerful and famous rival.,
"I'm not saying I was the fire*of a smokeless ashtray," she "But I'vebeen selling mine for three years. N ©w t eorother people come along. W- 't youscared?" (The Los Angeles i:7_1e;_. Novembe, 6,1977, p. 18) Reps. uted from ;:,e Los Angelo, imes.
PROBLEMS OF SMALL BUSINESSES
Although there is not doubt that small businesses are the
backbone of America's economy, many small businesses are fighting
to sirvive. They are hampered by production and marketing costs
and growing government intervention in the form of mandatory rules
and regulations. I, the past few years small entrepreneurs have
been especially hurt by the, rapid rise in interest rates caused by
depressed markets brought my more cautious purchasing consumer
and industrial buyers, and economic inflation and recesc;lon periods
that cause higher operating costs and prices. Small bu3inesues
find it harder to cope with these-economic problems than large
businesses.
37
Part I, Unit ANature of Small
Business
"T would be nuts to Io throAgh this am-thev sdas,sighs Ben Blanc, president of Cailipe, Inc., aPhiladelphia manufacturer of children's wear. In
the past year his volume has shrunk form $250,000to $150,000, his material costs have increased 25%,and his labor costs have risen 20%. But pinched byheavy inventories ( "I overbought last year when Ithought prices were right") and the drop in sales, hehas been able to raise his prices on 15%. Blanccomplains that only his bigger competitors cansurvive these days.
"Take Oshkosh B'Gosh, Inc. They can make somethingthat sells for $3.75," he says. "Hell, I can't evenstart to make it for that." Another big problem isaccounts receivable. More than 25% of last year'ssales are on collection, a situation Blanc calls"deadly." Says he, "The collection agencies chargeyou 20% to collect, but my margin is only 16%, soI'm losing money collecting money." Blanc, who hasbeen in business 15 years, concludes, "If we haveanother bad season, I will shut down."
Blanc's lament is repeated by small businessmen invirtually every industry in every part of the country."The small businessman these days is like the guy inLas Vegas who prays, 'Please God, let me break even.I need the money,'" says Oliver O. Ward, head of theSmaller Business Association of New England. "Things
are tough now, and it looks like they will be tougha long time coming." (Business Week, June 30, 1975,p. 96)
There are those who believe that the s- 11 business scene
in our economy is not so gloomy. Whether economic conditions
are good or h. or opening a small business, one thing is
certain--deciding to bedome an entrepreneur and opening a
business requires making:difficult decisions. Having a
successful business is possible, but it is hard work, and
unrealistic expectations by the entrepreneur can cause problems.
Part I, Unit ANature of SmallBusiness
Ninety-five percent of all businesses are ,zonsidered small
businesses by the Small Business Administration (SBA) and
they account for about 43% of the gross national product.
But these statistics hardly give a clue to thetremendous effort involved in getting a new enter-prise off the ground- Nor do they hint at the oddsthat are against keeping it going for any length oftime. "Though the survival-probability rates arefragmented or dated, the evidence indicates that therisks have multiplied and the-chances of making thegrade have not brightened," said Bette Blondin andRowena Wyant in a recent report for Dun & Bradstreet.
Difficulties in raising capital, a lack ©f adequateinformation, government red tape and problems ofday-to-day management all seem to conspire againstthe entrepreneur. "Whether boom or recession, nineout of ten failures are traceable to managerialinexperience or ineptitude," says Dun & Bradstreet.The obstacles are such that it takes great initiativeto strlke out on one's own." (The Wall Street Journal,November 14, 1977, p. 1) Reprinted by permission fromThe WallStreet Journal, e) Dow Jones & Company, Inc.1977. A11 rights reserved.
39
Part i, `nit A
Nature of SmallBusiness
EXPLORATION ACTIVITIES
1k' you feel that you understand enough about the nature
of small business? The following activitL2s may hLp you
apply some of these concepts to "real" situations. After com=
piecing the activities, check your understanding of the material
with your instructor.
ASSESSMENT ONE
1. Explain why small businesses are more important in
some industries than in others.
2. Interview two entrepreneurs in your community who
-basically the same products or services. Ask them tc
explain what they believe the future or small
busineSs is in our economy.
Select two businesses in your area that sell basically
the same products. In written form, discuss how each
competes with the other. In ether words, what methods
dOes each employ to attract customers?
4. List at least three products that you believe have been
improved through competition and explain the improvements
compared to the original product.
Visit what you think is a local small business. Ask the
owner oror. manager if they believe the busi! ..so is small
land the specific reasons why or wny not. Is it because
the firm has a small sales volume? Is it because it
40
Part I, UnitNature ofBusiness
employs a small number of workers? Compare. what the er.crenreneur
tells you with the .SBA definition. iicw are they similar? h.-q
o they dif'17
POSTE'' "7S.SITF:
Explain _ion among businesses = basic to our
economy.
Name and briefly describe two charar_teristicof smal
business.
What is a small business? Define.
Describe the differences among small manufacturing firms,
retail businesses, wholesale enterprises, and service
establishments in terms of size of businesses and the im-
portance of each industry to the economy.
5. What are some o the major problems being faced today by
small businesses? List and briefly describe each problem.
Compare your answers to your responses to the preassessment. You
may want to check your postassessment answers with your instructor.
41.
Part 1. LinLt A
Nature of SmallBusiness
SELF-EVALUATION
How wen did you know the information needed to do the
activities,
Very well
( ) Fairly well
A little
Be honest , _ yourself. If you feel you don't know the
material well enough, it might be helpful to review this section
before going on.
PREPARATION/ADAPTATION
PREPARATION/ PART I UNIT A
ADAPTATION NATURE OF SMALL
BUSINESS
REASSESSMENT
Here are some questions that test for knowledge of the
contents of this level. If you are very familiar with zhe
information needed to answer there perhaps you should go to
another unit -= check with your instructor. Otherwise, jot
down your answers. After you've read through this level,
take the postassessment at the end of the "Preparation/
Adaptation Act! les" section and measure what you've learned.
1. How have changes in consumer behavior affected
small businesses?
2. What are the advantages of being a small business?
3. Discuss the future of small businesses. Are you
optimistic?
4. Discuss the types of small businesses that you
feel are growing rapidly. Why are they doinp so well?
5. Discuss the uusiness you would like to own and why
you believe it would be successful.
43
Part I, Unit ANature of SmallBusiness
TEACHING/LEARNING OBJECTIVES
Upon completion of this level of instruction, you shouJJ
be able to:
1. State some of the predictions being made about the
future of small business.
2. Identify.some of the consumer behavior changes having
An impact on small business.
3. Identify some of the types 6& small businesses which
are having real growth.
4. Identify the'advantages of being a small business.
5. Describe the functions and rvices provided by the
Small Business Administration.
6. Discuss the importance of economic conditions on small
business.
WHAT'S THE
FUTURE OF
ALL
BUSINESS?
Part I, Unit ANature of SmallBusiness
SUBSTANTIVE INFORMATION
THE OF BUSINESS
Nearly every small business owner has engaged in some
"crystal activity to predict the future of small
bu The fail ,--)f small business is alarming;
in some sectors of ':he economy it =; increased over
the last five years. The trend toward conglomerates and
mergers and the continued growth of large companies has
caused some individuals to believe the future of small'
business is bleak.
Here at the Sting Restaurant, life is a 16-hour-day, six - day -a -week whirl for the Dallas family.The three-year-old restaurant consumes their timeand energies as they try to balance reasonableprices with fresh food and homemade dishes whilecompeting with the quick-frozen economics of thechain restaurants springing up around them.Within a short distance of the Sting, in theaffluent Philadelphia suburb can be found suchcoliporately owned dining spots as Stouffer's,Victor-,a Stati the Joshua Tree, Howard Johnson'sthe Dutch Pant.y, and Valle Steak House.
The Dallas family_ is only too aware of theinroads that the chains are making in therestaurant business. Chains now run 24% of allU.S. restaurants, compared with 10% a decade ago,and by 1982 they are expected to account for asmuch as 35%, according to the National RestaurantAssociation. Partly as a result, it's estimatedthat nearly 40% of independently owned restau-rants close down or change hands -in their firstyear. "When we move into a neighborhood, locali:ndependents lose business," says FrederickRufe, an executive of Marriott Corp., which ownsthe Joshua Tree ch-17:n." (The Wall Street Journal,December 2, 1977, p. 1) Reprinted by permissionfrom The Wall Street Journal Dow Jones & Company,Inc. 1977. All rights reserve
45
VOW MANY WOMEN
INV MINORITY
MTREFRENEURS
LL MERE BE
rN THE FUTURE?
Others are m
Entrepreneurs e Future
Part I, Unit ANature of SmeLlBusiness
optimistic. They believe that since
government has encouraged the development of small businesses
through such efforts as OMBE (Office of Minority Business
Enterprises) in the Department of Commerce and the Small
Business Administration (SBA) loan progam for women entrepreneurs,
the futu ,A of small business is bright. Es' rk, Inc., a Chicago
based firm, has es :mated that the number of female-ot. eec busi-
nesses reached 978,000 in 1976, more than double the number in
1972. Howevt, of the 9.4 million small businesses in the United
States, only about 5% are owned by women. Based on recent activi-
ties, it can be assumed that the number of women entrepreneurs is
going to increase.
The latest available statistics on minority businesses, com-
piled by the Census Bureau in 1972, showed that there were nearly
400,0 ©0, minority -maned firms the United States, of which about
-,;ere owned by blacks. Manufacturing was the most popular type
of business being started by nonwhites. For many years, the
government has been taking for- 1 action to encourage minorities
to become entrepreneurs. The Office of Minority Business Enter-
prises (OMBE) has sponsored many programs to help minority
businesses. OMBE dispenses about thirty -fay e million dollars
annually to organizations that assist minority business people,
such as the Urban League and the National Business League. OMBE
believes that there are opportunies for minority businesses in
manufacturing, particularly in energy and - electronics.
46
WHAT TYPES
OF SMALL
BUSINESS ARE
EXPERIENCING
GROWTH?
Part I, Unit ANature of SmallBusiness
Those who are optimis ic about the future of small
business state that better education is available to prospec-
tive entrepreneurs, technological advances such as minicomputers
are available at lower prices, crd the increasing desire on the
part of young people "to be their own boss" all point to a
brighter future.
Robert Bjorkstedt went 2.distributing lightbulbs.but he managed to closeWhat he learned in college,making costly mistakes.
business for himselfs business went sour,C: ithout ta;-.ing a loss.
he says, saved him from
Gary Martin is a 27-year-old systems analyst forGenerrq Motors who once had considered running hisown company. But, he says, a college course showedhim that he snit cut out to be his own boss.
These are just (two) of the 200 stulents whc
1971 have passed through Carnegie-Mellon Universitycourse for budding entrepreneurs. The one - semester
program at the university's highly regarded GraduateSchool of Industrial Administration aims to teach thefundamentals of starting up a business and the pit-falls to watch out for on the road to col9oratesuccess. (The Wall Street Journal, December 9, 1977,p. 1) Reprinted by permission from The Wall StreetJournal,®Dow Jones & Company, Inc. 1977. Allrights reserved.
Business Types ExprOepOngljApid Growth
There is no question. that in our economy more people are
employees; most work for someone else. Yet some recent
statistics show a trend towards small business ownerships.
Consider the number of small catering shops, house plant
stores, jewelry manufacturers, and various craft shops that
have opened.
47
WHAT BUSINESSES
ARE MOST LIKE ,Y
TO SUCCEED?
Part 1, Unit ANature of SmallBusiness
Money magazine recently surveyed twenty -six. bankers,
professors in schools cf business, Small Business Administration
representatives, members of Service Corps of Retired ExecLIti-
and executives of small business investment companies through--
the United States. These individuals were asked to select those
most successful and those most likely to fail from a list of
eighty-one comLon small businesses. The results cf the survey
now:
THE 10 BEST
1. Building materials stores. Increasedresidential construction and do-it-yourselfrepairs should boost sales bg10% to 15% this year.
2. Auto tire and accessories stores. T32a.:,1
car owners are doing more and more repairthemselves, which should help produce agrowth 'ate of about 9.7% this year.
3. Liquor stores. Industry growthexpected to run at least 11% in 1978.A hard working retailer can expectsomething over 35% profit on eachdollar of sales.
4. Sports and recreation clubs.interest in exercise is the key tofuture profits. A club requires alarge initial investement and annaulfees of about $2 million to turnabout $26,000 in profits.
5. Funeral homes and crematories. Smallestablishments make roughly $9,200 onevery $100,000 they take in. Despitea decreasing death rate, the number ofdeaths remains around 1.9 million a yearand is expected to increase with thesenior-citizen population.
6. Seed and garden supply storez. The profitratio is about the same as for sports clubs.Growth is expected to run about 8% to 9% ahead oflast year.
48
WHAT BUSINESSES
ARE THE MOST
LIKELY TO
FAIL?
part 1, Unit; A
Nature of SmallBusiness
Sparting goods manufacturers. Greaparticipation in outdoor sports isproducing estimated growth rangingfrom 8% a year for bicycle and bicyclepart producers to 19% for the makersof equipment for team sports and snob)and water ok
Engineering, laboratory and scientificequipment. Because the aero%auticalindustry is rebounding, engineeringequipment sales should grow about 12%this year. Manufacturers of scalesand lab equipment can expect aboutgrowth.
9. Hardware stores. Hardware stores alsobenefit from increasing numbers of do-it-yourselfers. High profit marginsmean that hardware stores don't needhuge sales volume; $650,000 in saleswill produce $30,000 in profits.
10. Office supplies and equipment. Thisb:,Tiness is remarkably resistant torecession--a firm always needs officesupplies. Prof -its are substantial;
every $ million in sales can return$40,000. n''edicted 1978 growth: about
THE i0 WORST BUSINESSES TO OPEN
Local laundries and dry cleaners. Since1972, improved home laundry ems andthe increasing use of synthetic fabricshave slowed growth in this business.Older, established cleaners have stayedalive-by providing extra services, suchas rug cleaning.
Used-car dealerships. Banks have generallysoured on making loans to used-cardealers and their customers because ofthe high risk involved. Current predic-tions show the business shrinking in1978.
Part 1, UnitNature r,f Sral7
Business
Gas stations. Competition a;
profits have t ZiShed these once Lora--,000 a
year, a station would have to gross about
$-4.8 million.
franchises. To ec
Local trucking The cos
lionized labor and gover vrent,.4117,E-7-r-
prase. Growth pro spec s are slucv
Restaurants. other business attraas many prospective entreprenew s as
one does. Growth potentialabout L070 in 1978, and profits
7
that bad, about 3.8;; if you are successStill, "for every one that succeprobably a dozen fail for lack ofmanagement know-how." says Sam Sici l iano,
a Salt Lake City SBA official. Fast-food
franchises offer management assistance,but a major franchise like McDonald'sor Burger King requires a cash invest-
ment of $85,000 or more.
Infants' clothing stores. Babies arehardly booming, and retail clothingstores, particularly small independent
ones, are encountering slow dernnd and
stiff competition.
7. Bakeries. Supermarket bakery depart-ments make survival tough for indepen-dent stores. Shops that make it do soby offering specialized services.
8. Machine shops. Over 5,000 independentshops make this business highly com-petitive. Each $100,000 in salesyields an average $3,300 in pretaxprofits.
9. Grocery and meat stores. Unless thesestores offer special services, likedelivery, the going gets rough.
Parc 1, Uniture of Sma-i
Business
10. Car washes. High v o r, strong com-petition and high capital invectmentmake this one of the least attractivefor the entrepreneur. (Money, March1978, p. 51) by Marlys Harris. Reprinte1from the March 1978 issue of MoneyMagazine by special permission, 1978,Time Inc. All rights-reserved.
The seasonal business is another type of small business
that is growing rapidly. Seasonal businesses can be retail,
wholesale, service or manufacturing firms that are planned
so that their major sales volume is during a particular time
of the year. The rest of the year the business plans to
operate low gear, if at all.
Seasonal enterprisk, is indigenous to summeror w'inter resort areas, but there are many othernon-resort businesses that lend themselves tothis concept. Seasonal businesses can also betailored to fit around the hours of another job--or the demands of a growing family. Some peopleare able to live wholly off their seasonalprofits; others are content to earn a valuablesuulementary income. (Family Circle, February 3,1978, p. 48)
Claudia Jessup and Genie Chipps are co-authors of A
Woman's Guide to Star in a Business published by Holt,
Rinehart and Winston. In a Family Circle article they listed
twenty small seasonal businesses that have been successful.
OF THE MOST SUCCESSFULSEASONAL BUSINESSES
Retail
Boutiques can be seasonally profitable inresort, tourist areas. Consider resortwear, souvenirs, local crafts and jewelry.
51
1;
Stalls markets,are good locations.organic cosmetics, books, crafor items, olos,Fouts on L--L--1a1,7,
utensils, housewares.
Fart 1, Unit ANature of RTall
Business
Sidewalk vending is regulated 4ocalvandor's per,Mits and availal':- t atlsnAttract impulse buyers with inexpensiveitems: crafts, accessories, novelties,flowers , umbrellas, sachets and so On=
Conscomnr,ssion
Like.
t Shops sell consigned goods on.
20-40V. Can e'en: art,
Food, Glorious Food
In any season, sell, lg food is .th top reta-_-Z,
business as well as the most closely regulated.
Don't proceed with any food idea before in-
vestigating local zoning law health regula-
tions, licensing, permit
Restaurants. with seasonal clientele do
best with specialties: soups, salads,_
chili, ice cream, ro-,' n yogurt, health
foods.
Pushcart Vending can require an outlay of$500 to $l,500 for the cart, depending ontype. Most popular: hot dogs, ice cream,
popcorn, ethnic godds like egg roil
souvlaki, tacos.
Catering can fit any season. You might
specialize in canapes, hors d'oeuvres,birthday cakes, holiday baked goods,desserts box lunches.
Wholesale Foods are marketed in coun ry andhealth food stores, gift shops, small gro-
ceries. Try: candies, jams, jellies, con-
diments, breads, pies, quiches, ro,,.1en main
dishes.
Fart 1, Unit ANature of SmallBusiness
Campus Catering in college towns canstart with direct-mail pitch to parentsadvertising exam "care" packages (boxedgoodies delivered at exam time) andbirthday cakes for the toiling student.
Roadside Stands cLth fr7ntage
(check zoning).try: cut flowenc,homemade baked gocrafts.
on a busy road
fresh produce,mgional goods,
handnade
Over-the-Counter Prepared Foods involvesetting up a retail shop in a pr ire loca-
tion to catch seasonal crowds. Best bets:
take-hone main dishes and desserts.
Specialty Franchises like =e dream and
frozen yogurt can close down for thecoldest northern months, pro 'ding ayear's income in 9 months or less.
For Services Rendered. .
Flea Markets are very popular now. Finda large space to rent (parking lots, drive-in theater) and advertise for vendors(antique dealers, crafts people). Rent
space at flat fee per day ($15 to $25per space is usual).
Home Services include animal care, feeding,plant or lawn care, mail forwowding, house-sitting or -airing. Distribute brochureslisting services; base fees on time and anyspecial skills you possess.
Party Planning calls for imagination andorganizational abilities. Standard feeis 25% of total budget. Work with caterers,rental halls, paper-goods outlets to offerdiscount arrangements. Charge minimum feefor consultation; obtain advance deposit.
Party Entertainment can draw on talents asa clown, magician, puppeteer at childrenparties. Charge flat fee plus overtime.
53
Part 1, Unit ANature of SmallBusiness
Tour guides can coordinate and run: regionalbike tours, nature, bird-watching hikes, back-packing, star-gazing, historic walking tours.Advertise in travel guides, travel sectionsin newspapers; talk to Chambers of Commerce,travel agents, hotels, tourist informationcenters.
Child Care can be: play groups, kiddie tamservice, after-school care, baby-sitting.Check state/local regulations on businessesinvolving children and insurance requirements.
Classes (you can) teach your specialty:cooking, exercise, sports, gardening, eraHave adequate space, supplies; advertiselocally, direct mail.
Cottage Industry produces hanctnade crafoods, Christmas items. Final price mustcover: marketing costs, raw materials,equipment, labor, overhead. Add a minimum50% markup per item for profit. (FamilLCircle, February 3, 1978, p. 160)
The growth of small business was recognized when
former President Nixon proclaimed a "Small Business Week."
In the Proclamaton Statement, Small Business Week, 1974,
he said: "The history of America is in large measure the
history of independent enterprise. From the earliest days
of our history, the trader and the merchant, pushing west-
ward, laid the foundations for what has become the world's
greatest economic achievement."
WHAT'S THE
ADVANTAGE TN
BEING SMALL?
Part I, Unit ANature of SmallBusiness
ADVANTAGES OF BEING SMALL
Being small is not always a disadvantage. There are those
who believe that this kind of business can capitalize on its
smallness. The small business has greater flexibility, is able
to adapt quickly to new or changing conditions, can provide more
personalized service to its customers, and can specialize in
goods or.services to a greater extent.
In some certain situations, small businesses have a\
definite advantage. For example, a small business:
(1) Can have close "family" relationships with employees
and some customers. Small business people know their
employees and caramormally meet with them daily.
Because of these relationships a small/business often
has higher morale, and at times, higher productivity.
Knowing the customers personally is certainly an advan-
tage; their needs and wants can be:more readily satis-
fled.
(2) Can offer personal "special" serli ._e to customers.
Some types of businesses--such as the local interior
decorating studio, the custom picture frame company,
the architectural firm, and the child care center,
provide the personal touch to customers.
55
Part I, Unit ANature of SmallBusiness
Can-offer perishable materials efficiently. For
example, the florist business can clear a profit
while not necessarily benefiting from expansion.
Small florists can join together in a "wire service ""
plan. They can serve a large market of potential
customers:over a large geographical area, thus taking
care of local needs more efficiently.
(4) Can provide their services or products more efficiently.
Real estate businesses that operate on a smaller local
scale have prOven to be quite successful. The recent
growth of franchised real estate firms supports this.
Small local brick and stone companies are another example.
The cost of transporting such materials long distances is
almost prohibitive.
Small businesses can also take advantage of government
support. The role of small businesses in our economic system
is not an accident. Special federal government programs for
small businesses have helped them assume a healthy position
in the economy.
Mismanaged large organizations have also provided advantages
to small businesses. Because of the competition factor in our
economic system, most of today's large bus nesses.were at one
time wellmanaged small businesses. They grew because the firm's
leadership and personnel had the skills and training to manage the
business Successfully. It is probably accurate to say that there
56
HAVE CHANGES
IA ONSUMER
BEHAVIOR
AFFECTED
SMALL
BUSINESS?
Part I, Unit ANature of SmallBusiness
are many small businesses today that will be the big
businesses of tommorow.
Shaklee Corporation is a good example of a firmthat began small and is today the seller of $245
million worth of good supplements, cosmetics and
household items. In 1956, Shaklee, who wasover 60, and two sons, began selling vitamins
and food supplements out of senior Shakleebasement. In 1973, the Shaklee business had salesof $75 million and went public selling 700,000shares at $23 a share. The family continues to
own 56% of the stock. Shaklee salespersons, mostwho are housewives and moonlighters, are allself- employed and sell the company's products by
doorbell ringing and party throwing throughout
the country. (Forbes, October 15, 1977,Reprinted by permission of Forbes Maggiifie fromOctober 15, 1977 issue.
The small business owner will achieve success by using
techniques that will promote the advantages of being small.
The small firm ought to capitalize on these advantages, when
appropriate, and not attempt to meat big business head-on. These
advantages, combined with the increasing demand by consumers for
specialized services and custom goods, suggest that small business
will continue to have. an important role in our economy.
CHANGE± IN CONSUMER BEHAVIOR
In today's environment, change is a Rey word. New
enterprises enter the economy; some grow; others merge
with other firms; and some become large conglomerates.
Nothing seems to be too static in the business world.
Energy crises and envirohmental` controls claate challenges
for some businesses and opportunities for others. Social
changes, such as the number of people in the labor market,
57
Part I, Unit ANature of Small
Business
are significant to business. As more women return to
work, the need and demand for more house-Lad conveniences,
from microwave ovens to food processing machines, have in-
creased. In the last fifty years, much has been done to make
/housekeeping easier. Dishwashers, dryers, blenders, mixers,
can openers, freezers, and sweepers are a few of the labor-
saving devices now on the market.
To complement the labor-saving appliances, new crease
and soil resistant fabrics were developed. Food producers
have produced frozen foods, diet foods, foods packaged
for large families or individual servings, various sizes
of cans, jars, and boxes, and specially wrapped packages
go from the freezer to the oven.
Tbe,increased number of working women has had substantial_
impact on our economy. In some families, working women provide
additional` income which allo- the family to purchase goods that
at one time were luxury items. Income in excess of that required
for basic needs is called discretionary income; its amount has
increased significantly in the past ten years. In 1950 only
I
23.8 of wives were employed outside th_ home; today, over 44%
are in the work force. Many retailers have had to adjust their
hours to accommodate working women. Most major grocery chains
are open evening hours, and some are even open twenty -four hours
a day.
58
Part I, Unit ANature of SmallBuSiness
Mere people are on the move. Years ago transportation was
limited and people were confined to their immediate area. Now,
with our vast highways, airplanes, automobiles, trains, and boats,
more businesses .;re needed to provide mobile citizens with the
services and goods they desire.
Another social change is caused by the overwhelming American
desire to not be overweight. Businesses that provide.goods and/or
services for the "slim" look have been growing rapidly. in addition,
the apparel industry has had to adjust according to this social
change, producing more clothing in the smaller sizes, changing
standard size labeling, and even modifying styles.
The age groups that will grow fastest in numbers between
now and 1985 are the 25-44 range and persons under 5 and over 65.
Other Changes in society such as'rising divorce rates, growth of
the number of children attending preschools, and the credit explo-
sion all have impacted on small businesses.
Change is no doubt inherent in the business world. The
ability to cope with change is certain to be even more crucial
in the years to come. Businesses will need to learn how to adapt
to it; resisting change or having a "status quo" attitude will pro-
bably bring failure. Entrepreneurs who develop open mindedness
and are innovative and creative will undoubtedly find their
businesses profiting from change.
HOW DO SMALL
BUSINESSES
AFFECT OUR
ECONOMY?
Part I, Unit ANature of SmallBuslness
A classic example is Certron Corp., an Anaheim
(Calif-.) producer of blank cassette cartridges andprecision computer parts. "There was simply no
financing available for us," says Edwin R. Gamson,Certron's president, about a $600,000 operatingloss reports last year when the oi? crisis sent
elastics prices soaring. "We stayed alive by
trimming operations and keeping on a positive
cash basis. The banks have been extremely
cooperative with us, except in giving us money."After its.big suppliers, DuPont and Monsanto, could
not fill company orders during the shortage, Certron
had to turn elsewhere for 50% of its material."Black market was out of the question,' Gamsonsays. "Their prices were out of sight." SoGamson turned to the major airlines, purchasing
their used plastic dishes, eating utensils, and
cocktail glasses. With help from the healthdepartment we learned to clean them, grind themup, and use them over again," he explains. "We
also bought used Kodak Instamatic film car idges
om film processors.
Certron had been selling cassette cartridges
to Ford Motor co. in several different colors,
but adding the new materials gave the batches
a muddy color. Undaunted, Gamson added black
to disguise the polyglot antecedents. "And
we convinced Ford they could have any color
they wanted as long as it was black," he sayswith a grin. (Business Week, June 30, 1975,
p. 98 and 100)
ECONOMIC CONDITIONS AND SMALL BUSINESS
Now big is our economy? One way to measure the size of
our national production is to add together the value of all the
goods and servies we product in one year The total is called the
gross national product or GNP.. Small businesses, according
the Small Business Administration (SBA), account for about 43%
of the gross national product.
60
Part I, Unit ANature of SmallBusiness
Business, small business in particular, has an effect on
economic conditions, and is in turn affected by the prevailing
economic.climate. For example, during times of recession, many
businesses find themselves appealing to new markets because of a
decrease in their sales. Inflation is an economic factor which
has many implications for businesses. Prices for food and services
are continually rising, yet profit margins and incomes do not in-
crease as rapidly. In recent times the energy supply has come to
be an important factor. With present shortages and the uncertainty
of future availability, a cost for energy is climbing. The
growth of both government red tape and the business failure rate
impact on small businesses. As businesses fail, those remaining
a14 sharper and represent stiffer competition.
Other economic conditions which can affect small businesses
are personal income and consumer confidence. That is, do people
have the money to buy goods and services and do they want to?
The labor supply is yet another factor to consider. During
periods of high unemployment, the pool of qualified workers will-
ing to work in 11 businesses .is larger than during periods of
low unemployement. Finally, the stability of prices contributes
to the economic climate. The greater the price stability the more
healthy the climate for starting a new business.
You/,/can start some businesses on a "shoestring" but opening
other enterprises requires large sums of money. Either type will
require capital. Undercapitalization is often the major reason
61
Part 1, Unit ANature of Small
Business
why a business fails. You will need to have enough money to
cover start-up costs until the business begins to break even.
Start-up costs should include initial inventory; one-time expen-
d tures, such as remodeling and equipment; three months' operating
costs, and personal living expenses.
Changing Times has estimated the capital some typical
businesses require. A service -type business requires less
capital than a manulacturing business. Opening a hardware store
with of items will take more money than a handicraft
consignment shop. Review the information below in terms of your
business /ownership aspira
entrepreneur?
Type of Bua fleasAnd
Annual Cross Sal
Repair. Service
Furniture
Cdr
TV/Radi
Appliance
Clock/Watch
Shoe
ns. Can you afford to become an
InvestmentIn
In_yento
In I (:(
Ives(For Start-OpAnd Fivst ThreeMonths' ration
$10,000$20,000
$15,000 to$40, 000
$10,000 to$25,000
$6,000 to$20, 000
$8,000 to$12, 000
$15,000 to$25, 000
Business Machine
Bicycle
Contractors (Plumbing,Carpentry, Electrical, Etc.)
Equipment Rental Service$50,000 to $200,000
Part I, Unit ANature of Small
Business
$ 6,000 to$10, 000
$ 6,000 to$10,000
$10, 000 to
$30,000
uu pzng /Recreation $ 7,500 to $15,000 to
$15,000 $25,000
Soft Goods (Party, $12,500 to $25,000 to
Sickroom) $21,000 $35,000
Fabric Store $25,000 to $58,000 to
$100,000 to $200,000 $35,000 $58, 000
Hobby/Crafts Store $20,000 to $36,000 to
. Under $200,000 $30 poo $56, 000
Based on data 'n Bank of-America's Small Business Re orter_
series. (Changing Times, August 1977, p. 40). Reprintedby permission from Changing_ Times, The Kiplinger Magazine,
August 1977. Copyright 1977 by the Kiplinger Washington
Editors, Inc '1729 H. Street, N. W., Washington, D. C.
20006.
One basic principle of our economic system is freedom
of opportunity. This means not only the right to select
one's employer but also the right to become an entrepreneur.
The decision to become an entrepreneur is an individual
one and involves consideration of many factors, including the
existing economic climate.
WHAT'S THE
SMALL BUSINESS1
ADMINISTRATION
ABOUT?
Part I, Unit ANature of SmallBusiness
SMALL BUSINESS ADMINISTRATION
In 1953 the United States Congress passed the Small
Business Act which authorized the Small Business Administration
(SBA). The SBA was originally a Korean War program that dealt
with military contracts which supplied small plants. The SBA's
major purpose is still to aid small business in bidding on
government contracts.
in recent years the SBA has been strongly criticized.
.There are thOse who believe, the SBA is not doing the job it was
developed to do. They feel that the SBA is not an advocate for
small businesses, that it does not "campaign" enough with
Congress and legislators on behalf of small business. The June 30,
1975 issue o63usiness Week included an article on the SBA
controversy.
64
Unit I, Part ANature of Small
Business
A BOX SCORE ON THE CONTROVERSIAL SBA
It is the official national policy that small bus ,
deserves a thumb on the scale to help balance thegreater financial muscle and managerial sophistica-tion of the big corporations. But with just over4,000 employees, a fiscal 1976 budget of $119-million,and a rather hazily defined constituency, the SmallBusiness Administration, which is charged with carry-ing out that policy, has little hope of being anaid to more than a handful of the close to 10 millionsmall businesses in the country. It generally getsgood marks or what it does, but a lot ofheatedcriticism for not doing a lot of other things.
The SBA is generally thought of as a lending agency.Most of its loans, however, now come from privatelenders with SBA guarantees of repayment. In a
typical year, SE borrowers range from such smallbut established cOmpanics as Replogle Globes, Inc.,of Chicago (which got $650,000) and I-ttermountainRubber Industries, of Commerce City, Colo. ($580,000),
down to '57lom-and-pop" establishments that neededonly $1,000: Zapata's Tamale & Burrito Co. inDenver and Shirley's House of Beauty in St. Louis.The loans are supposed to be only for ventures thatcannot raise the money, and are riskier thannormal bank deals.
SBA-guaranteed loans are not cheap. The currentinterest ceiling is 10.25% and the big urban bankstend to charge that. In contrast, the interest rateon direct loans--a rate set by Congress--is a bargain
6.75%. But that money is hard to come by. The SBA
saves it for the very riskiest ventures--most oftenminority-owned businesses--or very special caseswhere a bank just Will not come through, even with
a guarantee. The Small Business Committees inCongress constantly lean on the SBA to make more
direct loans. But the agency prefers to guaranteebecause they lessen the fiscal impact of governmentspending and reduce the subsidy element - -a reduction
that the agency brass thinks makes the program more
politically palatable.
Part I, Unit ANature of Small
Business.
The agency 1. s also criticized for making the wrong
kinds of loans. Karl H. Vesper, a University ofWashington business professor, for instance, arguesthat the SBA's loans should be oriented more towardmaintaining small, struggling, service establishments."The government uses its money to immortalize dino-
saurs such as Lockheed and Penn Central rather than
help a small business that could eventually replacethem," he says.
Red Tape. Businesses complain about delays in getting
SBA O.K.'s un their applications. The average pro-
cessing time is 29 days, even though loca offices.
have authority to act on most loans. Be uty Admini-
strator Louis F. Laun concedes that 12 processi
has fallen further behind than we tho it had,"
7attributing some of the delays to ove caution in thewake of revelations that some local ffices had been
making a string of unlawful loans.
The agency's mandate, however, re hes well beyondsing, and its officials are rutting increasing
emphasis on helping small businesses to improve theirmanagerial techniques and pressuring to get them a
fair shake from gooernment. All new loan applicationsfor instance, are now reviewed by local, SBA manage-ment experts as well as by financial specialists.
The deal is often contingent on the borrower's takingsome management training--a proviso that has drawn
a lot of flak from black borrowers, who have called
such demands racist.
The SBA has recruited thousands of retired executivevolunteers and college business students to providecounseling for small entrepreneurs. The agency is
now conducting "austerity management" seminars in BO
cities. "Small business is hurt in a recession be-
cause it is generally operating with less liquidity,
explains Henry Warren, head of the agency's oanagementservices. "Where he is hurt, he is hurt very rapidly.The entrepreneurs are given tips on how to drum upnew business and how to slice expenses (examples: call
suppliers collect, lay off marginal employees, demandrent reductions).
66
Part I, Unit ANature © SmallBusiness
er. The SBA was created in Z953 as an out-growth of a Korean War program that earmarked certainmilitary supply contracts for small plants. And it
still a major aim of the organization to counterthe fact that, as AdMinistrator Thomas S. Kleppe putsit, "a lot of little companies don't know the firstdoodley-run-bum about bidding on a government contract.
Kleppe, 55, a two-term Republican congressman fromNorth Dakota, became head of the SBA in January, 1971.
His agency continues to goad other government agencito set aside contracts for bids only from small com-panieg, and about one-third of, all government procure-ment is now done that way. In addition, close to $499million worth is bought from minority-owned smallbusinesses with no bidding at all.
But besides trying to see that government helps smallbusiness, the SBA is trying to assure that governmentdoes not hurt small business. The agency's effortswere underscored this week when President Ford tolda small business group in Washington that "I wantsmall business released from the shacklesof federalred tape."
The SBA has always tried to be a pressure point forsmall business in Washington. Kleppe takes creditfor persuading Congress to include used equipmentin the investment tax credit law, for instance. Buta formal organized advocacy effort got off the groundonly last fall. Its intent is to plead small businecase before other federal regulators and to see thateach agency has some official charged with makingsure that rules are not drawn without thinking aboutthe special problems of small business.
A Typical_ Case: The Food & Drug Administration (FDA)recently proposed new food storage regulations thatsmall packers say would be unbearably expensive forthem. The SBA found out that the FDA checked out theproposed rules only with the industry's largest manu-acturer. The FDA is now consulting with smallcompanies and wfll rewri to the standards .
Such eases are not uncommon. When Milton Stewart,Presidp,It of the National Small Business Assn., is
government can help small business, he
"TO start with, get off our backs." Bureau-Kreppe's goal is to make sure that otheris do just that
Part 1, Unit ANature of Small
Business
The Government's RoleIn Small Business Lending
FiscalYear
Number ofLoans
Millions of DollarsTotalAmcW1 t
SBAsham ,+
1960 3,707 $ 173.5. . . $ 148.91961 5,062 261.3 . . . 225.11962 6,373 380.6. . . 316.71963 6,282 537.6 265.81964 6,537 . 342.1 275.61965 14,034 = 472.4 301.11966 12,656 444.7 . 371.9196/ . . . 11,530 504.5 . 420.01968 13,100 624.3 . 505.71969 .. . 14,523 . 699.3 . 570.1
---1320 15,102 709.6 596.02Z,495 1,122.7 . 963.2
1972 28,025 1,573.8 . 1,360.8Z973 33,948 . . . . 2,196.2 .. 1,915.81974 . . . 27,485 . . . 1,947.8 . 1,696.62975** 20,280 1,442.3 . 1,259.8
* Includes both direct loans and guarantees** 15W estimate
(Buaine Week, June 30, 1975, pp. 100 and 101)
68
c(L.51
Part I, Unit ANature of SmallBusiness
PREPARATION/ADAPTATION ACTIVITIES
Are you able to apply your knowledge of the nature of
small business to your business aspirations? Are you totally
familiar with economic factors, consumer behavior changes and
types of small businesses that hav, an impac,_ on entrepreneur-
ship? The following activities should help you check your
knowledge of the nature of small business.
ASSESSMENT ONE
1. Make a list of the services the SBA -ro-ides to small
businesses based on the article you just read in Business
Week.
Would you approve some form of legislation, either state
or federal, that would establish minimum qualifications
for entry into a given type of business? Why? Why not?
If you believe standards ought to be established, what type
(kinds) of standards do you think wou be appropriate?
Write a three- to four-page paper describing sn existing
small business and t-.11 in your report why you think it
is or is not successful, and how it could be improved.
4. Explain the importance of small business to the nation's
onomy.
Fart I, Unit ANature of Small
Business
POSTASSESSMENT
1. Identify three changes in consumer behavior that you
believe have had an impact on small business.
2. Ale and briefly discuss hre, advantages of being
a small business.
3. What do you believe is the future for small business?
Are you optimistic? How did you reach your conclusions
about the future of s all business?
Identify some of the types of small businesses which
are having real growth. Why do you think they are
doing so well?
5. Identify a business you aspire to own and explain
,why you believe the business would be successful.
Compare your answers to your responses to the preassessment.
You may want to check 5 postassessment answers ith your
instructor.
SELF-EVALUATIOR,
How well did you know the information needed to do the
activit L
) Very well
) Fairly well
) A .little
70
Part 1, Unit ANature of SmellBusiness
Be honest with yourself. If you feel vou don't know the
materll well enough t might be helpful to review this section
before going on.
ro k T.
Harr4
LIOGRAPHY
Sontheimer s Better
"Do c'u Have Who
Part T, Unit ANature of Small
Business
C " F,,rb,
Heinzel, R.S. "Riches-To -Ra_a-To-Riches Story: An
EnLrepreneur Sells E;:perienee." The L. AngsJuly 17, 1977: Part IV: 1-7,
Jessup, C. and Chipps, G. "Seasonal Businesses Work Now."'atr 1v Circle, February 3, 1978: 48 and
Klein, F.C. "The Venturers: Doyle Hoyt Survives Bankruii:lcy,
Jucceeds Second Time Around." The Wall Street JournalNo ember 29, 1977: 1.
Machalaba, D. "The Venturers: Bob Dallas Is Fighting Chainsand-Exhaust4on With-Small Restaurant.-"- _e-Wall' Street
Journal; December 2, 1977: 1,
May, R.B. "The Venturers: John Ma _y Struggles T Keep AnIdea ve On Bare-Bones Capital." The Wall StreetJournal, November 14, 1977:' 1.
MEflpg_Speclal Problems Of Small Business. Nei.J York:
Committee for Economic Development, 1947: 14.
Overend, William." .ventor's Pipe Dream Going Up In SmokThe Los Angeles Times, November-6,-1977: 18.
Panacea, Placebo, Nostrum, Amen." Forbes, October 15, 1977:83.
"Panty Girdles Lose Out To Miniskirts. Columbus DisRa=ch,April 5, 1970: 41.
Pappas, V. "The Venturers: Colleges Are Replacing School Of1-14fd Knocks For Some Businessmen." The Wall StreetAurnal, December 9, 1977: 1.
Shaffer, R.A. "The Venturers: How Fusion SystAms BlunderedTo Success With Exotic Product." The Wall Streetournal, November 17, 1977: 1.
Part I, Unit ANature of Small
Business
"Small Business: The Maddening Struggle to Survive.Eusines Week, June 30, 1975: 96-101.
"Small Businesses You Can Start On $6,000 AndlUp.'
gjeAlsjps Times, The Kilplinger Magazine, August 1977: 40.
74
Part I,Naturo of Small
Businc,ss
SOURCES TO CONSULT
FOR FURTHER INFORMATION
cfarlane, W. H. Principles of Small Bus i hess Management.
New York: McGraw-Hill Book Co., 1977.
Revel To Offer Expert Business Advice." The Los Angeles Ii c
July 31, 1977: Part VIII: 3.
Small Business Administration, Washington, DC: Government
Printing Office.
Analyze Your Cost of Liar t Aii no. 35.
. is Your Cas1_2L101L2y,11!1!? Management Aid no. 174.
Six Methods for Success in a Small Store. Small
rketers Aid no. 127.
SL3Replasprofit Out the Back Door. Small Marketers
Aid no. 138.
lire Analysis for Small Business. Technical Aid no. 87.
75
PACEA Program forAcquiring Con letencein Entrepreneurship
RESEARCH AND DEVELOPMENT SERIES NO. 194 A-1
Instructor's GuidePart IGetting Ready To BecomeAn EnirepreneurUnit ANature Of Serail Business
ThE NATIONAL CENTER
FOR RESEARCH IN VOCATIONAL EDUCATIONTHE OFIC 5' .A7t uNvuisrry1260 KENNY ROAD .COLDIABOS. 13.4k1 4 3210
USING THE INSTRUCTOR'S GUIDE
The Instructor's Guide contains the following:
Teachingheaminr .objectives (identical to the Teaching/
Learning Objectives found in the PACE unit)
Teaching /Learning Delivery Suggestions
Pre/postassessrient 7iuggested Responses
This nfolrr3tion is geared tov -arc's the three levels of learning, and is designed
for use as a supple eirriental teaching aid. Additiona instructions for using PACE..
sources of igformation, and an annotated glossary can hr found in the PACE
Resource Guide.
11i
PRE/POSTASSESSMENTSUGGESTED RESPONSES
EXPOSURE
1. According to the Small Business Administration (SBA) a small business is "one whichis individually owned and operated and not dominant in its field of operation.
Look for the follc.win respones: lack of experience, lack of money, wrong locaton,inventory mism.-Jnagenent, too much capital in fixed assets, poor credit-grantingpractices.
3. If a business does not produce profits it cannot survive.
4. Of the 13.1 million businesses in the United States, 3.4 million are small businesses. Siriaiibusinesses account for 43% of the grotm national product. These figires point out theimportance of small business in our economy. Of course, the imporunce of small businessis relative to industry type. For instance, retail stores constitute the largest number ofsmall businesses (approximately 40%), while rmnufacturing is dominated by big businessconcerns.
Look for the following respones5: small businesses are more flexible, small businessescan c--; -Tntrate on smaller segments of markets, small businesses can quickly react tosuch coo.,9rns as competition and general eKnomic conditichs.
EXPLORATION
Competition is at the heart of our economic system. It affects products, buyers, andseller:. It helps buyers becat_ le it prompts sellers to improve product quality whilereducing costs. It helps sellers because it leads to development of new products and promotes ent y of new firms.
2 Look ar re:pones that include descriptic of the foliowing: low in.tial capital requi;e-ments, highly centralized potential marls, a, highly technical skills unnecessary.
Look for rsspons.,,, that note difficulties of defining small bur:. ass. 1 hese difficultiessbsance of discluture, laws of sale proprietorships, and --ferent criteria used to
',1e small "lettiriess in various type; of irdustries.
_
4. Forty percent of all small businesses are retailers. The next largest group is service enter-prises, followed by wholesalers, then manufacturers. Because of the initial investmentrequirements, small manufacturers are the least prevalent.
5. Look for the following responses: rising production and selling costs, increased govern-ment intervention through rules and regulations, tight money resulting in higher interestrates and depress2d markets.
PREPARATION/ADAPTATION
1. Look for the following respones: consumers want more leisure so they buy more laborsaving appliances, consumers have more discretional,/ income so they buy luxury goods,more and more of consumars' income is being earned by women, consumers are moregeographically mobile, consumers are more weight conscious.
2. Look for these respones: a small business has greater flexibility and can adapt quickly tonaw or changing conditions, a small business can provide mar -iersonalized service tocustomers, a small business can specialize in a product or semi'. 2,, a small business receivessupport from government agencies.
3. Respondent should consider such factors as government support, ate of failure, prepara-tion methods, and opportunities for minorities and women.
4. Look for the following responses: auto accessori .ores; uuilding materials stores; liquorstores; spores and recreational clubs; funeral horr.va and crematories; seed and garder,supply stores, hardware stores; manufacturers of sporting goods and engineering, labora-tory, and sientific equipment; office supplies and equipment stores.
Respondent should identify a business and consider the initial amount of capital re.luiredand expected growtl rate.
---TEACHING/LEAKNING OBJECTIVES TEACHI`,'.,i/LEARNING DELIVERY SUGGESTIONS
Up ,n compietion of this - instruction you should be able to.A variety of dal 'rent teaching /learning methodologies have been
used. To help yce organize your work and plan the use of this feveithese suggestions are made:
et
..1
0CO
..1
U.I
>LU
....1
00...0a
LLIN
1. Define small business.2. Identify some of the factors w ,i in defioing a small business.. Explain what is meant by ":he profit motive,"
4. Define profit, supply and demand, and freedom of oho-5. Describe the role of small bus, -ess in our economy.6. Ncrni corm -f the majo: causes for bu:iness failures,
". Contact your local Chamber of Commerce, Better Business Bureali,local retar :Ts and rhar, :facturers to get samples of products andservices that were not available in your cornmuni'y two years ago.
2. Attempt to locate a business owner in your community who openedthe business within the last three years.
3- If you are locate( -,ar an SBA field office, arranee for one of thestaff members to _:t with the groub.
4. Ask a local entrepreneur to meet with the group .:, disci's-3 therz!azion5!-,ip of profit Imo _.-S- and 5-noly end demend to smallbusiness.
00_0.x
LLI
Explain the major groupings of small businesses, their Importanceto our economy and specific problems each group faces.
2. Explain why it is difficult to define small business.3. I lent4 the characteristics of small businesses.4, Discuss the importance of small business.5, Describe how supply and demand work in our economy.6. Describe competition in our economy.
1. Attempt to locate j :mall business owner in your comm,,nitv whois active in common' :y affairs. Invite the person to meet with thegroup to discuss the future of small businesses in your community.
2. Invite a local entrepreneur who recently opened a business to speakto the group, Topics covered can include initial investments andstart up costs.,
C.0
114.,0.co
Ti.......
c0ea
toa.0
1. State some of the predictions being made cbout the future of smallbusiness.
2. Identify some of the consumer behavior changes having an impacton small business,
3. Identify some of the types of small businesses which are having realgrowth.
4. Identify the advantages of being a small business.5. Describe the functions and :en,:ces provided by Small Business
Administration (SBA).5. Discuss the importance of economic conditions on small business.
1. Invite a Small Business Administration member to meet with thegroup to focus on the existing controversies regarding SBA.2. Ask a local entrepreneur to discuss with the group how changesin his or her products or services have reflected changes in consumerbehavior.
tf
The PACE series consists of t, ese parts and units.
PART I: GETTING READY TJ BECOME AN ENA1EPRE!7E1R
Unit A: Nature of Small Business
Unit B: Are You an Entrepreneur?
Unit C: How to Succeed and How to Fail
FART II: BECOMING AN ENTREPRENEUR
Unit A: Developing the Business Plan
Unit B: Where to Locate the Business
Unit C: Legal Issues and Small Business
Unit D: Government Regulations and Small Business
Unit E: Choosing the Type of Ownership
Unit F: How to Finance the Business
Unit G: Resources for Managerial Assistance
PART III: BEING AN ENTREPRENEUR
Unit A: Managing the Business
Unit B: Financial Management
Unit C: Keepin6 the bsiness Records
Unit D: Marketing Managemeni.
Unit E: Successful Selling
Unit F: Managing Human Resour. 3
Unit G: Community Relations
Unit H: Business Protection
RESOURCE GUIDE